One man is behind Allentown's nightmare: Mark Mendelson

Tim DarraghOf The Morning Call

Downtown Easton has the elegant State Theatre, once an eyesore, now a premier Lehigh Valley concert hall. In Bethlehem sits the sturdy Radisson Hotel Bethlehem. Not long ago, it was on the fast track to blight. But it was saved by investors who kept the old inn alive. Allentown has an aged theater and a unique, Roaring '20s-era hotel on the same block. But the theater is in ruins. The hotel is shuttered. One man is behind Allentown's nightmare: Mark Mendelson.

A family trust and a business Mendelson runs own the foul, blighted Colonial Theater and the vacant, lifeless Americus Center Hotel, declared this summer unfit for human habitation.

Another Mendelson business owns other property nearby, a parking lot that once was the doomed Corporate Plaza office building, and the trust owns the squalid Sal's Spaghetti House, which was a thriving restaurant when he bought it in 1986.

A downtown bank branch that a second Mendelson trust owned last month went to sheriff's sale, where it was bought by his son. That building has stood empty for three years.

For most of the 17 years since he came to town, the brash 46-year-old businessman has maintained a simmering war with City Hall over the blight and late or unpaid taxes. Adding to that is Mendelson's unpaid water and sewer bill, the largest in Allentown. While fighting the city, Mendelson's companies also have been in court over claims that they stiffed other businesses for sums ranging from a few hundred dollars to more than $1 million.

In the meantime, Mendelson has lived a lavish lifestyle in the posh Philadelphia suburb of Villanova, enjoyed a sprawling vacation lodge in the Poconos, owned numerous cars and hobnobbed with powerful Pennsylvania politicians and bureaucrats, even making some of them business partners.

To Allentown's political leadership, Mendelson's record shows only contempt for the city. After 17 years, city leaders said, the feeling is mutual.

''I'd love to see him leave town and I'd love to help him leave,'' said Mayor Roy Afflerbach.

But once Mendelson settles in, he is not easy to move.

''I've survived a lot of mayors,'' he said. ''I'll survive more mayors.''

How can someone who allows his properties to rot and mind-boggling bills to go unpaid survive and thrive, even capturing contracts financed by state taxpayers?

The man in question does not provide easy answers. In three telephone interviews, Mendelson spoke in measured tones, but was combative, threatened lawsuits and suggested that his detractors are bigots who discriminate against him because he is Jewish. He characterized himself as a victim, pinning the responsibility for the decline of his businesses and the local economy on city leaders. He also declined to discuss most details of his businesses or even past projects.

''I'm a private company. I don't need to disclose what I've done,'' he said.

But an investigation by The Morning Call based on an extensive review of public records throughout Pennsylvania and beyond and interviews with dozens of those who have worked with Mendelson reveals a record of audacious development plans and stunning failures.

Along the way, Mendelson has developed patterns in support of his business dealings. A pattern of supporting politicians and forming partnerships with current and former high-level bureacrats while at the same time withholding taxes to the governments they run. A pattern of delaying payment or failing to pay debts while seeking  and sometimes getting  deals to ease his own liabilities.

Property records also show that in spite of their inactivity and deterioration, Mendelson's Allentown properties have continued to work for him, acting as collateral for tens of millions of dollars in loans  far more than what he paid for them. As recently as October 1999, he secured a loan of $3.5 million using one of them as collateral.

Allowing Mendelson to function despite his properties' decline have been city officials who at first welcomed his attempts to revive downtown but found themselves overwhelmed and outgunned once things went bad.

But even for a developer with such a controversial record, the year 2002 is shaping up to be a particularly bad one in Allentown. Consider:

Code violations sent guests at the Americus packing in August. Inspectors said the 13-story building needs new plumbing and fire sprinkler systems. Meanwhile, Lehigh County is suing over unpaid occupancy taxes from the months when the hotel had guests.

The former PNC Bank property near the Americus, held by a Mendelson trust, went to sheriff's sale last month. SB Associates, run by Mendelson's son, purchased it and assumed the debt, which at one point reached $1.57 million.

Allentown officials earlier this year continued moving toward taking by eminent domain the Colonial Theater and the former Sal's Spaghetti House, both declared blighted.

In addition, Mendelson warded off sheriff's sales in Lehigh, Carbon and Montgomery counties in recent weeks with the payment of more than $100,000 in delinquent taxes and penalties on properties he controls.

In Philadelphia, claims totaling hundreds of thousands of dollars are on file against him or his businesses. In recent weeks, one of his businesses paid more than $263,000 to clear six years of back taxes and costs for one property there. Two other Philadelphia properties in his name have been tax-delinquent since 1996 and 1997.

Despite all this, another Mendelson project in Philadelphia made millions in recent years selling the development rights to an aborted casino development, and he has a new, massive proposal for the same site.

There haven't been such positive and public prospects for Mendelson in Allentown in years, however.

Mendelson, a Philadelphia native, lays the blame for his troubles in Allentown on the city's economic woes and on city officials who he said ''tortured'' him with unfulfilled promises and turned their backs when he needed help.

''I'm not in business to lose money and I've lost money for a very long time with the promise of a convention center, a conference center,'' Mendelson said. ''We invested $30 million into the city of Allentown. We did a lot of things for the community. The community disappeared. The business community disappeared. The leadership has no solution about what they're going to do for anybody. ? That's why Allentown is what it is, that's why it is in such poor shape.''

If anything, Afflerbach said, Allentown has suffered because it was too easy on Mendelson. Afflerbach said code enforcement officials were lax in enforcing regulations aimed at preventing and removing blight until recently.

''I think because he holds so much property, he was treated differently,'' said Allentown Community Development Director Ed Pawlowski.

And former Mayor William Heydt said he avoided taking Mendelson to court because he feared it would cost ''big-time money, money that's not there.''

Regardless of who's to blame, the scenario that has unfolded is one that no one expected in August 1985, when Mendelson bought the aging Americus and pledged to spend ''whatever funds are necessary to make this a success.''

City officials said that would be only the first of many promises Mendelson failed to keep.

''He came into town as a savior,'' said Pawlowski, ''but he turned into one of the biggest slumlords that we have.''

The Americus' rise and fall

Eighteen years ago, when a dowdy, drab Americus Hotel was on the market, Mark Mendelson went where no one else  not even a top executive in Ramada International  would go.

At the time, the hotel was in dire need of a makeover. Built in 1927, the Americus' distinctive Moorish-style architecture had been partly obscured by an out-of-place contemporary brick. With its worn interior, Mendelson once said, the hotel was no better than a ''flophouse.''

The Americus project suited him. Mendelson, who once described himself as a high school dropout who began working in Philadelphia's Italian Market as a preteen, brought hustle, aggressiveness and an eye toward underperforming properties to find bargain real estate.

It was a combination that some found overwhelming.

''He always seemed to be a weird dude, a little frenetic, cocky,'' said Tony Hanna, Bethlehem's director of community and economic development and part of a syndicate that looked into buying the Americus just as Mendelson snatched it up.

Before he began buying properties, Mendelson fixed them. He went into construction and drywall installation in the 1970s and early 1980s, and helped finish casinos in Atlantic City.

''We started out as builders,'' said Mendelson. ''We did Bally, Ocean One (a mall), the Tropicana; tons of work in Philadelphia and northern Jersey  rehab and new construction.''

Mendelson in 1985 bought a significant stake in the foundering Equibank, and was invited to join its board. The Pittsburgh-based bank sent Mendelson to Palm Beach, Fla., reportedly with $828,000, to revive a struggling construction project called the Palm Beach Hampton. He helped finish the exclusive two-building condominiums on a spaghetti-thin strip of beachfront and get it off Equibank's books about a year later. He then sold his interest in Equibank.

Even before leaving Equibank, Mendelson sought to build on his success with the Hampton. He formed Hampton Real Estate Group, and Pennsylvania Department of State records show Mendelson would use the Hampton name for at least 14 other corporations.

Looking northward, Mendelson formed a partnership with Gerard Hallier, a former chief executive officer of Ramada International  which built the Tropicana in Atlantic City  to consider developing property in the Poconos.

That plan never took off, but the pair saw a bargain in the Americus and signed an agreement of sale to buy it in 1984. Hallier dropped out of the deal, but Mendelson stayed, and on Aug. 7, 1985, Mendelson bought the hotel from Albert and Anna Moffa for $1.25 million. Equibank provided the loan for the mortgage.

Former Allentown Mayor Joseph Daddona at that time called the deal ''the most exciting thing in this part of town in many years.''

Despite such statements of support, Mendelson, then only 29, perceived hostility. ''I didn't feel too loved when I first came to town,'' he said in an interview with The Morning Call a few years after buying the hotel.

Still, Mendelson got to work. City construction permit records show that he spent hundreds of thousands on renovations, not including amenities such as new furniture or improvements that didn't require permits. Mendelson said he invested millions in the hotel.

The results showed, notably in the hotel's dining room and ballrooms. Preservation organizations gave awards to Mendelson. The hotel further bolstered its image in 1988 by taking on the nameplate of the Radisson chain.

Daddona recalled Mendelson's early years at the hotel as an exciting time, with regular Exchange Club and Rotary meetings and conventions at the Americus.

''He was supporting projects for downtown,'' Daddona said. ''That's when the ballrooms were being used for a lot of events. ? There was something going on every day almost, in the late 1980s.''

It was a heady time for Mendelson. Only in his early 30s, Mendelson, by then a father of four, had already acquired the vacation lodge in Lower Towamensing Township and was poised to make two big deals in Philadelphia. By this time, Mendelson testified in a 1987 case, he owned perhaps 30 vehicles, including a boat and motorcycle.

But it also was around this time that private businesses and public agencies began finding themselves in court with the Americus Center Inc. A handful of cases in 1986 and 1987 turned into dozens by 1990.

Things got so bad that in 1994 the Americus lost its affiliation with Radisson over late payments and bounced checks. Then, with nearly $5 million in liens against the hotel, it went to tax sale. Mendelson gambled that no one would bid on the property  thus becoming responsible for the unpaid bills  and won. At that time, Mendelson began to make amends by paying some of the hotel's back taxes.

Nevertheless, the Americus continued to spiral downward. The hotel went under the umbrella of the Clarion chain in 1995; by 1998 the Clarion affiliation was over. Broken elevators, leaky plumbing and accumulating garbage forced city inspectors to pull the hotel's health license. Unpaid assessments to the Downtown Improvement District Authority piled up to $21,744. With back taxes and fines totaling about $37,000 and a water and sewer bill of nearly $145,000 against Americus Center Inc., city officials again said they are targeting the property for sheriff's sale.

Mendelson said the hotel has lost more than $5 million in recent years and he slammed Allentown officials, led by Afflerbach, for doing nothing to help the local economy. If they would help other businesses in the city, Mendelson said, that would help him by increasing economic activity.

He said that instead of focusing on him and his back taxes, city officials should pay attention to more important issues such as crime-fighting, better housing and economic development.

But with the administration locked in on what Mendelson characterizes as a relatively ''minimal amount of taxes,'' the two sides are at a stalemate.

''If I pay my taxes, is that going to increase my hotel room revenue? No. ?,'' he said. ''Does the administration hate Mark Mendelson enough for them to not participate in something productive?''

In any case, Mendelson added, he has the right to pay his taxes late with penalties if he wants. He said he withholds his taxes and pays the interest and late fees because ''it makes a point.''

But Mendelson also takes the same approach in other communities in which he or his businesses own property. They have been late with taxes on his Carbon County vacation property  recently purchased at sheriff's sale by his son, Seth  and on his Philadelphia and Montgomery County holdings, property records from those counties show.

Mendelson said Allentown officials target him unfairly and attributes it to ''bigotry or a personality conflict, I don't know what.''

Former Mayor Heydt, with whom Mendelson also clashed, said Mendelson brought on the battles.

''It's unusual how some people spend so much money fighting things,'' Heydt said. ''A lot of people with money do that. They spend more time fighting and trying to outwit people than moving on with life.''

Afflerbach said part of the responsibility for the decline rests with the city. ''The failure of the city in the past to take aggressive action (upholding) code enforcement and tax collections has allowed the situation to deteriorate,'' he said.

Afflerbach toured the Americus last year and said he saw shocking evidence of the city's laxity. In the hotel's top-floor ballroom called the Skyline Room, windows had been left open for what appeared to be weeks or months, he said. Curtains were in shreds. ''It was a rodent-infested dump,'' Afflerbach said.

Eric Weiss, director of the city Bureau of Building Standards and Safety, disputed Afflerbach's claim that city inspectors failed to do their jobs thoroughly. ''Obviously it's a very, very complicated situation,'' Weiss said. ''Whatever was possible and within the realm of possibilities for our bureau, we did it.''

Afflerbach and Pawlowski said they don't want to have to take the Americus by eminent domain, but feel cornered by Mendelson.

''I'd much rather see that he did the right thing,'' the mayor said. ''He had the opportunity to do the right thing and he hasn't for a decade.''

While Mendelson was fighting the city on taxes and fees, he also was leveraging millions from banks by using the Americus to secure the loans. Mendelson declined to discuss the private claims against the property, but Lehigh County property records show that he has borrowed more than $6 million against the Americus. In addition, Mendelson borrowed more than $27 million against the other four Allentown properties he controlled over the years, according to county court records.

Meanwhile, in what would become a repeated source of contention, Mendelson in 1989 got into a public spat with city officials over a delinquent water bill of nearly $12,000. When the bill soared in 1992, Mendelson refused to pay; he said he was told the city would look into determining the cause of the spike. He said leaks reported recently by building inspectors only developed this year and were not the cause of the rise in the hotel's water bill 10 years ago. The leaks were among the reasons for the hotel's shuttering in August, Pawlowski said.

Heydt negotiated a plan for Mendelson to pay $5,000 to $15,000 a month or face the temporary loss of his health license, forcing a halt to food service at the hotel. To Heydt, the payment plan, which the city applied in part to the Americus' delinquent business privilege tax bill, was a success.

''It was a way to get some money from someone who was paying nothing,'' the former mayor said, estimating that Allentown received between $100,000 and $150,000 through it.

''It was sort of like found money.''

Despite Heydt's sense of qualified victory, Mendelson stopped paying on the plan, Pawlowski said, leading to the closure of a newly opened nightclub and eventually the entire hotel.

''We're to the point where we're not going to give him any breaks,'' Pawlowski said. ''He had one and he missed it 10 times. It's not like he's attempting to do anything positive.''

Mendelson and Heydt have different recollections of the deal. Mendelson said Heydt told him penalties and interest would be forgiven.

But the former mayor said, ''There were no waivers of interest. There was no discount.''

As of Nov. 8, the Americus' water and sewer bill was $144,357, said Allentown Finance Director Barbara Bigelow, adding that it is the city's largest water and sewer arrearage.

Lenders at times gave Mendelson favorable treatment similar to the water-bill payment plan. For instance, Meridian Bank in 1991 restructured a $4 million mortgage on the Americus for which Mendelson still owed $3 million by eliminating interest and late fees, according to records on file in the Lehigh County Courthouse.

Despite such breaks, vendors and contractors at times found themselves in court with Mendelson over unpaid bills. Americus Center Inc. has been involved in scores of court cases, most of them as defendant. Many of those cases involved nonpayment of bills or taxes. Many would be settled; some are still in litigation.

For example, PPL Corp. filed claims totaling more than $100,000 for unpaid electric bills since 1994. Neither Mendelson nor the utility would discuss the cases.

Frank Modrick, district manager for J.C. Ehrlich, a local exterminator, works for one of the former plaintiffs against the Americus. He recalled doing a job at the hotel years ago and not being paid  and then being solicited for another job around 1995.

''We went back to them because we signed an agreement with a different kitchen manager,'' Modrick said. ''They said, 'Oh, you'll get paid this time.' ''

Ehrlich got stiffed, court records show.

Said Modrick: ''I think that any small business feels kind of bullied when that happens.''

Mendelson said the amount and type of litigation in which he and his companies have been involved is an unfortunate part of the business.

''Every company that's of any size has outstanding litigation,'' he said. ''Over a 20-year period, you'll probably see a couple hundred cases. That's not unusual when you're doing a lot of business.''

Former Americus General Manager Jim Chenault said he tried again and again to make the hotel self-sustaining, but unexpected problems would constantly crop up with the aging building. ''I did everything I could to stay current,'' said Chenault, who left his post at the hotel late last year.

Plans to convert more of the hotel rooms into apartments, using federal assistance, seemed to present the most promising future for the Americus, he said, but those plans never came to fruition. ''Why that never happened,'' Chenault said, ''I couldn't tell you.''

Regardless of whether Mendelson converts the building to apartments, the hotel needs significant improvements to its plumbing system, city officials said. In addition, the fire sprinkler system that covers part of the Americus will have to be retrofitted to cover the entire building by May 2005.

Under the sprinkler law, passed in 1999, owners of high-rises needed to submit plans for their sprinkler systems by May 2001. Mendelson has yet to submit a plan, according to Deputy Fire Chief Daniel M. Sell.

In yet another area of Americus aggravation between the city and Mendelson, fire inspectors halted two parties there in June over code enforcement and safety violations. Mendelson said the raids were nothing more than harassment.

Mendelson said he's restored ''millions of square feet'' of buildings, including the Americus, ''but I won't do it again and have illegal police action.''

The confluence of events facing the Americus  overdue bills, deteriorating facilities, a dreary economy and perceived antagonism from City Hall  led Mendelson to spend money on operations outside Allentown, Chenault said.

''Unfortunately for the city, it was a business decision he had to make,'' Chenault said.

''He could walk in there and spend $8 million to $10 million in the Americus tomorrow,'' Chenault said, and have a beautiful hotel, but would still lose money.

Colonial calamity

When Allentown gained national infamy in 1990 by making the very bottom of Money magazine's ranking of 300 places to live in the United States, it illustrated the city's ignominy with a single photograph. The picture was captioned ''A vacant movie theater in Allentown.''

That theater is Mendelson's Colonial Theater. And if it is possible, the structure may be a greater embarrassment now to the city than it was then.

''From our point of view, in 1987 that was a usable theater,'' said Weiss, referring to the approximate time when Mendelson bought the Colonial. Today, the structure is shored up with exterior braces. Windows and doors have been sealed repeatedly to prevent vagrants' return. Crumbling plaster in office spaces litters the floors.

''He took an architectural monument in the city,'' Weiss said, ''and turned it into a degraded, worthless liability.''

Mendelson, who announced the purchase of the already-closed Colonial in April 1988, has had numerous plans  and run-ins with the city  over the property at 513-17 Hamilton St.

Initially, he sought to convert the Colonial to a state office building. Then, 12 years ago, Mendelson was quoted as saying the theater was too dilapidated to use, suggesting the property be paved over for parking. The property also became part of his grand plan for a towering office building complex taking up most of the north side of the block.

City officials became familiar with a model of a large office building Mendelson proposed for the site. That's all they would see.

''We never got any plans,'' said Kurt Zwikl, executive director of the Allentown Economic Development Corp.

As with his other Allentown properties, Mendelson has been late repeatedly with tax payments on the Colonial. The Mendelson Family Trust, which owns the building, owed $17,831 in back taxes and fees on the property as well as DIDA charges of $6,135 as of mid-September.

Meanwhile, city inspectors beginning in 1995 kept a close eye on the Colonial, filing citations for exterior structural deficiencies and unsecured doors and windows that permitted refuge to squatters. Mendelson faced a fine or jail for failing to make it secure, but those charges were dropped in 1997 when he complied, at least temporarily.

However, the roof repair was a ''Band-Aid on a broken leg,'' Weiss said. Water infiltration destroyed much of the theater, weakening the flooring so badly that a bathroom fixture fell through the water-logged mezzanine to the lower level, he said.

Mendelson last year finally set about repairing the roof permanently. According to city records, the work was estimated to cost him $250,000.

But after finishing 80 percent to 90 percent of the job, Mendelson stopped paying the contractor. Weiss, who was dumbfounded by Mendelson's decision to halt payments to the roofers, said the area where rainwater drains is unfinished.

''Quite frankly, we ran out of money on that project,'' Mendelson said, adding that if city officials wanted the best for Allentown, they would have offered assistance. ''Quite frankly, nobody came around asking, 'How can we help?' '' he said.

In the meantime, city officials issued a public nuisance order on the property and erected additional barricades across the theater's front late last month after they received complaints about people urinating in the vestibule.

Now, the boarded-up theater presents a sad contrast across the street from the $17 million federal courthouse that opened in 1995.

The Colonial is ''like a cancer,'' said Michael Rosenfeld, executive director of the Allentown Redevelopment Authority. ''I think unfortunately it's one of those things that causes people to lose confidence in downtown.''

Weiss said the city has tried everything from negotiations to fines to the threat of jail, but Mendelson has continued to be ''the most recalcitrant'' of property owners.

Mendelson said he would like to rent the Colonial's office space, making it a viable commercial property, but no one is interested.

''Why are these buildings vacant? It isn't because I want them vacant,'' Mendelson said. ''There's no demand.''

Rather than helping him find tenants and financing for the Colonial, Mendelson said, the city will try to ''steal'' the property by taking it through eminent domain. He said he has no intention of letting it go.

That is distressing news to U.S. Magistrate Judge Arnold C. Rapoport, whose federal court space overlooks his father's old law offices on the third floor of the Colonial, offices in which Rapoport spent many days as a youth.

''I look at it,'' he said, ''and what I see are a lot of memories that have been turned into rubble by a building owner who has zero regard for the building and the community in which it is located.''

Corporate disaster

Around the same time that creditors were starting to go to the courts over unpaid bills at the Americus, Mendelson leaped into another major venture in Allentown: Corporate Plaza.

Elements that would come to mark Mendelson's business in the city: his takeover of an underperforming property, conflicts with city officials, unpaid creditors and delinquent taxes, all are featured in the general outline of the history of the doomed office building.

Built with $7.5 million in public money, the red brick-and-glass seven-story office building and parking deck on N. Seventh Street finally took shape in June 1985 after years of bureaucratic delays. Tenants were slow to come to the unfinished office building, however. The property headed toward foreclosure, and the Allentown Redevelopment Authority stood to lose its investment of more than $500,000.

Mendelson saw a deal that was ripe for picking. In August 1988, he took control of Corporate Plaza for a reported $8.1 million.

Within a short period, the lease rate at the office building soared to as high as 95 percent, according to Mendelson.

It didn't come easily, however.

''There was constant wrangling over everything,'' said then-Community Development Director Donald M. Bernhard. ''It was a constant argument.''

Disputes with Mendelson became a regular occurrence. Less than two years after Mendelson bought Corporate Plaza, PPL Corp. turned off the electricity during a workday because of unpaid bills. At the time, PPL said the electric bill for Corporate Plaza Partners, of which Mendelson was general partner, reached nearly $15,000.

For his part, Mendelson said he never got any credit for saving a failing building. He noted that by taking the risk to fill and operate Corporate Plaza, more than $1 million in federal funds secured by the Allentown Economic Development Corp. stayed in Allentown for other development.

In the end, Mendelson was not responsible for the demise of the structure. It gained its place of infamy in the history of Allentown on Feb. 23, 1994. Center city awoke that day to a sinkhole that sent the building into a slow, irreversible collapse. Corporate Plaza was imploded about a month later.

The disaster did not end Mendelson's problems with the property, which regenerated as a parking lot. As with his other Allentown properties, the unpaid debts piled up.

Five years ago, the Allentown Parking Authority filed a claim in court for $8,922 for the return of its security deposit for the office space it rented before the collapse. Repeating a pattern seen elsewhere in the city, Mendelson negotiated a payment plan with the authority, but then stopped making payments, Executive Director Linda Kauffman said. That judgment's five-year life expired, meaning that the authority has to get the court to enter a new judgment if it still wants to collect.

But other bills still are due. Corporate Plaza Partners owes nearly $91,000 in assessments to the Downtown Improvement District Authority, DIDA records show. In all, the five properties that Mendelson or his businesses own or owned are nearly $130,000 in arrears to the agency.

People lose faith in Allentown and its institutions when they see Mendelson thumb his nose at the city, DIDA Executive Director Christina Fenstermacher said.

''I can't tell you how many times people have said to me, 'Why should I replace broken windows if Mark doesn't have to?' '' Fenstermacher said.

She also said DIDA, which is about to run out of money because of unpaid assessments, has been reluctant to tangle with Mendelson in court because the agency has a limited legal budget. But, like the city, the DIDA has turned its delinquent Mendelson accounts over to a law firm specializing in collections. Even if the DIDA goes dormant, the city will be able to demand payment for Mendelson's unpaid DIDA charges, Fenstermacher said.

Again, Mendelson said he's being singled out for criticism considering that the tract across Seventh Street, also wrecked in the sinkhole, has been left as an undeveloped lot.

''Look at how I finished that lot and look across the street,'' he said.

Afflerbach said another developer has been unable to find tenants for a building that would go on the site, a requirement for the reuse of the tract. That same problem: finding businesses to move into downtown, prevents the reuse of his properties as well, Mendelson said.

Despite his battling with local officials, when it came time to move on from the sinkhole disaster, Mendelson moved with dispatch, much to city officials' relief.

Heydt, whose first term had barely begun when his city's premier office building caved into the limestone beneath the street, marveled at how quickly Mendelson was able to get the state to muster scores of cement trucks to fill the cavity.

''He called the lieutenant governor on Friday and on Monday had 89 cement trucks to fill in that hole,'' Heydt said.

It wouldn't be the last time Mendelson would find the state working a beneficial deal with him.

The state hospitals

When the state Department of General Services in 1996 received the authorization to begin selling off large tracts  former state hospital properties, including several in or just outside Philadelphia  Mendelson saw another opportunity.

A corporation he led won one of them, the former Eastern State Hospital in Bensalem, with a high bid of $8.5 million in January 1998. It then transferred the tract to a partnership formed with Philadelphia area builder O'Neill Properties Group.

Mendelson businesses soon received all or part of three others: the Philadelphia State Hospital (formerly known as Byberry), the Pennhurst Center in East Vincent Township, Chester County, and the Laurelton Center in Union County, for $1.

State officials conditionally granted the properties to Mendelson and a partner, former Philadelphia Controller Thomas A. Leonard, for ''fair consideration'' in lieu of cash. Under those terms, the developer takes ownership of the property in return for a promise to generate a certain amount of economic growth through the site's redevelopment.

While he was securing conditional ownership of the properties, Mendelson hired George Manakos, a former Lehigh County commissioner and former head of a state government department that was selling off the hospital properties. Manakos said he had left his state post before Mendelson contacted him about taking over as president of Hampton Development Corp.

The partnership didn't last. Manakos quit working for Mendelson in less than a year and sued over allegedly unpaid wages and expenses. That case was dismissed Oct. 15 when a judge ruled Mendelson's due process rights had been violated.

Mendelson conditionally received the approximately 400 acres of state hospital property despite being delinquent on state business taxes. Eight liens filed in the Lehigh County Courthouse against Mendelson, the Americus Center Inc. and another of his corporations now totaling $230,343 remain open, according to the Pennsylvania Department of Revenue. Mendelson denied owing the money.

When asked why Mendelson was allowed to bid for state property when he owed back state taxes, General Services spokeswoman Samantha Elliott said the partnerships Mendelson formed to buy the state hospital lands were distinct from the entities that owe taxes.

''There weren't any agreements with Mark Mendelson the person, they were with these subsidiaries of his,'' Elliott said.

Weeks after Mendelson offered the successful high bid for the Eastern State Hospital property, he gave $5,000 to former Gov. Tom Ridge's campaign fund, campaign finance records show. Later that year and the following year, Mendelson got the other three state hospital properties at no cost.

Mendelson said he never asked for anything in return for a political contribution. ''I did it to get better government,'' he said.

Elliott also defended the arrangements, saying they had ''contract integrity.'' If Mendelson had attempted the deals under his name or those of his entities that owe the state money, the deals would not have been consummated, Elliott added.

Giving business to new partnerships controlled by Mendelson while his other entities owe back taxes, even to local governments, reveals how weak corporate regulation is, said Barry Kauffman, executive director of the state chapter of Common Cause, a government watchdog organization.

''Corporations or people who run them shouldn't be able to bail out and leave taxpayers holding the bag,'' Kauffman said. ''It seems to be an attempt to create new organizations to overcome perhaps past deficiencies.''

If state officials overlooked Mendelson's record, residents near one of the hospitals did not.

A neighborhood group fought efforts to begin turning over the sprawling Byberry property to private developers, including Mendelson.

''The taxpayers, that land belongs to them,'' said Mary Jane Hazell, president of the Somerton Civic Association. She said the organization favored housing for senior citizens and that Mendelson had ''no true plan'' for the Byberry tract.

Neighbors were so concerned about Mendelson that someone  Hazell insists she has no idea who  printed out stories about him and more than 100 entries from civil court dockets and left two thick binders of information for her at her front door. ''He doesn't have a very good track record,'' she said.

Despite getting the properties for $1, Mendelson's partnerships lost the Byberry and Laurelton hospitals for failure to receive the necessary local approvals. The Pennhurst proposal is under review.

Mendelson's partner Leonard declined to be interviewed but did say that he ''lost track'' of the hospital proposals and that he hasn't talked to Mendelson in a few years.

Hazell is a friend of Leonard, one of the top Democratic fund-raisers in Philadelphia and Mendelson's partner in the project. She questioned what Leonard was doing in business with Mendelson.

''I've known Tommy for 20, 25 years,'' Hazell said. ''I said, hey yo, you sleep with the dogs, you're going to wake up with the fleas.''

The LCB deals

Mendelson's business with the state extends beyond the state hospital projects.

The state Liquor Control Board has leases with Mendelson through the Mendelson Family Trust and the Mendelson Family Children's Trust, both of which list him as trustee, and Hampton Real Estate. They lease retail space for liquor stores at the Franklin Mills mall in Philadelphia and in Springfield Township, Montgomery County. Two other leases anticipate the construction of new stores on property owned by him or the family trust.

In the Springfield case, Mendelson first sought to raze the store and build a wine and liquor ''super store'' and a CVS pharmacy on an adjacent tract that also is owned by the family trust. Holding up the project is what is on that adjacent tract, the colonial-era Black Horse Inn.

Township preservationists were aghast when Mendelson initially proposed to level the inn, which is abandoned and in disrepair. A newer plan approved in September will allow Mendelson to move the inn to the rear of the property, making way for the larger state store and pharmacy.

But the new proposal does not sit well with preservationists, who fear that moving the two-story inn could damage the building, parts of which date to 1744. They also note that three other early-American inns along Bethlehem Pike not only survived the wrecking ball, but house viable commercial businesses.

Until a new state store is built, LCB spokeswoman Molly McGowan said, the Mendelson Family Trust's lease for $69,996 a year will remain. The proposed super store would pay the Mendelson Family Children's Trust $249,960.

As he did in other counties, Mendelson recently paid off thousands for 2000 delinquent taxes on the two Bethlehem Pike tracts. Also like some of those other properties, 2001 taxes are unpaid, according to county tax records.

Hampton Real Estate, which has the Franklin Mills lease, received a 10-year extension for the store through 2011. The state pays $295,200 a year in rent for that store.

Another liquor store, also still in the planning stages, would be at 8025 Roosevelt Blvd. in Philadelphia, not far from the Byberry property.

There's little evidence of fancy wines or liquors on the Roosevelt Boulevard site now, however. Occupying the property is an abandoned, dilapidated miniature golf course.

Mendelson and one of his ex-wives, Susan, own the property. They owe Philadelphia $48,152 in taxes on the tract.

As with the state Department of General Services, LCB officials said Mendelson's and his corporations' tax delinquency to the state  not to mention to local authorities  were not considerations in the decisions to approve leases, since the trusts did not owe the state back taxes.

Gov.-elect Ed Rendell said the state should pay close attention to the companies with which it does business.

''It makes sense'' to prohibit tax delinquents from securing contracts with Harrisburg as a matter of policy, said Rendell, who received campaign contributions from Mendelson while Rendell was running for Philadelphia mayor.

The 'A' project

Even with his problems in Allentown, Mendelson said the city should not underestimate his abilities. ''I don't do B projects,'' he said. ''I do A projects.''

However, Mendelson's biggest A project has been one that's never been built: Liberty Landing.

At various times since 1987, Mendelson has been touting the proposed development along a stretch of the Delaware River as ''the largest development ever in Philadelphia.''

The enormous planned development of luxury apartments, office space, shops, a marina and a hotel sprung from a partnership Mendelson formed with the Sheet Metal Workers Local 19, which owned the property.

The proposed $300 million mixed-use plan failed to get off the ground in the early 1990s, a victim of the economy at the time, said Jerry Roller, a Philadelphia architect who drew up the blueprints. ''I always thought it had validity as a concept,'' he said.

Roller left the project after suing in 1991 in a dispute over $82,000 he and his partners claimed Liberty Landing owed them. The two sides settled the suit, but Roller said it is ''very unlikely'' he would work again on a Mendelson project.

Mendelson's profile in Philadelphia was rising with this and other deals at the time, but his star has faded since. Michael Smerconish, the Philadelphia radio host and lawyer, brokered one of those deals with Mendelson in 1989. At that time, Mendelson was viewed as a significant real estate figure in the city, Smerconish said.

''I'm pretty active in Philadelphia,'' Smerconish said. These days, ''he's not a guy that's on the radar screen.''

But while Liberty Landing remained only a concept, efforts to keep it alive continued under the radar.

In 1993, Liberty Landing signed an option agreement with President Casinos of St. Louis, Mo., giving President the right to run riverboat gambling operations on the site if legalized in Pennsylvania. Gambling, however, never became law, a decision that was costly to President. Documents on file with the U.S. Securities and Exchange Commission show President paid $5.8 million in 1998 and 1999 alone on ''development costs,'' much of it to Mendelson and the union, before cutting its losses.

Despite 15 years of unsuccessful plans, Liberty Landing has been resurrected again, and is bigger than ever. Local 19 President and Business Manager Thomas J. Kelly in September announced that the plan now calls for a $1 billion apartment-townhouse-yacht club development.

Kelly, also the chairman of Philadelphia's Zoning Hearing Board, did not respond to calls for comment. Mendelson also declined to discuss the project further.

The project's new architect, Burt Hill Kosar Rittelmann Associates of Butler, Butler County, calls Liberty Landing the largest development of its kind in Philadelphia's history.

The news that Mendelson was still involved in Liberty Landing while letting Allentown properties rot did not sit well in Allentown City Hall.

''The bottom line is, he has the money,'' said Pawlowski, the city's community development director. ''He could pay this (back taxes and overdue bills) off. He doesn't want to.''

Indeed, campaign records show that while the casino plan was still on the table, Mendelson and his businesses spent large sums on politicians, with Liberty Landing Associates giving $10,000 to the Democratic National Committee. Mendelson's Hampton Financial Services also gave the DNC a total of $32,500 in 1996 and $1,000 each to President Clinton and Democratic congressional candidate Patrick Casey two years later.

Records do not show contributions from Mendelson or his businesses in this year's governor's race. However, Mendelson's partner in the project, the Sheet Metal Workers Local 19, gave Rendell's gubernatorial campaign $36,000 through its political action committee.

Mendelson's relations with the city of Philadelphia are not as frosty as they are in Allentown. Philadelphia leaders, he said, are more willing to work with developers through the city's industrial development authority and the Redevelopment Authority. He also credits former Mayor Rendell for bringing businesses and politicians from both parties together to improve the city.

It also happens, however, that Philadelphia is not as demanding about delinquent taxes.

Two properties he owns there have delinquent taxes going back to 1996 and 1997. City records indicate that Mendelson owes more than $200,000 to Philadelphia or the city school district. In addition, another lien for unpaid taxes filed 10 years ago by the city against one of Mendelson's failed ventures is still listed as open. That lien is for nearly $900,000.

Court records also alleged that Mendelson had overdue water bills there as well, but the cases were dropped.

A spokesman for Mayor John Street declined repeated requests to respond to questions about Mendelson's overdue taxes or the water bills.

When Street left City Council to run for mayor, he worked briefly for Klehr, Harrison, Harvey, Branzburg & Ellers, the law firm that represents Mendelson. (The firm also had been leasing space in Corporate Plaza when it sank into the ground.) In 1998 and 1999, Mendelson contributed $50,000 to the mayoral campaign of Martin Weinberg, the brother-in-law of Leonard, his partner in the state hospital projects.

Mendelson said he gave the money in the interest of promoting good government.

After Weinberg lost in the 1999 primary, Mendelson turned his attention to Street. Campaign expense reports show that he gave Street $26,000.

While waiting for Liberty Landing's birth, Mendelson in 1994 branched off into residential mortgage banking services by buying a stake in the money-losing First Chesapeake Financial Corp.

Within two years, Mendelson was appointed a director and got a new board, eventually moving its headquarters to Philadelphia from Virginia.

In 2000, the company made one agreement that had Allentown officials shaking their heads. It announced an agreement to acquire Keystone Information & Financial Services Inc., a ''municipal revenue recovery'' firm  in other words, a company whose purpose is to help governments collect taxes and penalties from delinquent taxpayers.

According to documents on file with the U.S. Securities and Exchange Commission, First Chesapeake ran into trouble in 1999 paying off a loan from Crusader Bank that grew to $2.1 million. But as in other examples, First Chesapeake, with Mendelson now chairman, got a break from the Philadelphia-based bank.

The company still owed $1.3 million on the loan at the end of last year, but Crusader Bank added two years to the term of the loan, according to First Chesapeake's most recent annual report.

First Chesapeake, which lost $737,000 last year and continued losing money the first six months of this year, is in court with another bank, however. Sterling Bank, based in Michigan, claims that First Chesapeake and a subsidiary owe about $230,000 of an approximately $600,000 loan.

Andrew J. Bayne, a Princeton, N.J., attorney representing Sterling, said, ''To the extent Mr. Mendelson is personally liable, the bank intends to have Mr. Mendelson in their sights as well.''

Mendelson this fall did settle a debt of more than $656,000 on an overdue loan from PNC Bank to restructure debt against the First Chesapeake headquarters at 10-12 Oregon Ave., Philadelphia, Montgomery County court records show.

Meanwhile, First Chesapeake set up operations in nine states, including south Florida, not far from Mendelson's early development success in Palm Beach.

The operation complements the Hampton Real Estate Group's listings there, which include rentals, townhouses, single-family homes and even oceanfront condominiums that go for close to $1 million.

But debt troubles followed Mendelson to Florida as well. Palm Beach County Court records show that Mendelson and his ex-wife Susan defaulted on a 1992 loan of $950,000 to build a house near Palm Beach. Two other banks went to court in the 1990s to get Mendelson, an associate and his businesses to pay back a total of about $115,000, according to court records.

Mendelson's personal life also has been a subject of various court cases. He has been divorced four times since 1991, according to Montgomery County Court records. And after 11 years, the terms of his 1991 divorce are still being contested in court.

He has been in court over claims for unpaid bills for pool service, landscaping and even trash collection at his Villanova home. And in a Lehigh County Court filing this summer, American Express Travel Related Services Co. and its Centurion Bank claim Mendelson and two family members have yet to pay bills that as of June totaled $64,583.

The Philly failures

Even considering the collapsed Corporate Plaza and the shuttered Americus, Mendelson suffered bigger setbacks about 10 years ago in Philadelphia.

Just as he was peaking in Allentown with his real estate purchases, Mendelson made a splash in Philadelphia, buying the former Palace Hotel on Benjamin Franklin Parkway.

Smerconish, the lawyer and radio personality, remembered Mendelson as an ''incredibly difficult'' person while he brokered the deal between Mendelson and the sellers.

''One thing I remember about him is we fought terribly over that hotel commission when I sold him the Palace,'' he said.

But the Palace sale, which brought Mendelson local media attention in 1989, would bring him misery only two years later.

Bell Atlantic Properties, which had loaned Mendelson millions to buy the Palace, evicted guests Nov. 20, 1991, in a foreclosure action. Managers hired by Bell Atlantic to take over the hotel said it took 11/2 years of repairs and renovations before it would open again.

''There was a flood in the lowest level of the parking garage of the building,'' said J. Mickey Rowley, general manager of the hotel after Mendelson left. ''The drains were clogged. The entire lowest level was off limits to cars,'' said Rowley, now executive director of the Greater Philadelphia Hotel Association.

Almost exactly a year after he lost the hotel, another big Mendelson project in Philadelphia fell apart.

Mendelson and a partner in 1990 sought to reopen the bankrupt Metropolitan Hospital with the intention of developing it into a specialty cardiac center.

But by 1992, the renamed Franklin Square Hospital was teetering on financial collapse. In a last-ditch effort, Cooper Hospital of Camden, N.J., took control of the property, but its financing stream dried up and the facility closed. Some judgments against Franklin Square remained active, including the one first filed by the city of Philadelphia in 1992 for $897,893 for unpaid taxes and fines.

Just as the Franklin Square management was leaving, FBI investigators swarmed into the hospital and seized financial records.

FBI records produced under the U.S. Freedom of Information Act show that insiders alleged to federal investigators that hospital funds had been misappropriated, ''ghost employees'' were on the payroll and that substandard renovations had been done at the hospital. One source told the FBI that the hospital was losing up to $1 million a month and that vendors insisted on being paid in full before or at the time of delivery. An audit of the hospital's books said they were in ''terrible condition,'' according to the files.

''I had nothing to do with that,'' said Mendelson.

FBI memos also show that as the Franklin Square case stretched into 1995, the investigation bogged down as Justice Department attorneys and FBI agents assigned to the case pursued other matters, including a possible illegal arms sale to South Africa.

Nearly three years to the day after the FBI seized the hospital records, Assistant U.S. Attorney David Hall decided against prosecuting the case.

The bank and Sal's

Even when Mendelson's downtown Allentown properties are relatively small and uncomplicated by occupants, such as the former PNC Bank building next to the Americus and the former Sal's Spaghetti House at 18 N. Sixth St., Mendelson has failed to keep up with payments. In a recent case, he claimed another reason for falling behind: ill health.

In court last month, Mendelson said poor health prevented him from keeping up with affairs regarding the bank branch at 527-33 Hamilton St.

''I've had nine heart procedures in the last eight years,'' he said afterward.

The bank case goes back to a mortgage of about $1.7 million Mendelson secured against the property from the former First Valley Bank. That loan allegedly went into default three years ago, and First Valley's successor, Summit Bank, sued for $1.4 million.

Mendelson partially satisfied the debt by selling the former post office building in Palmerton.

But he ignored further attempts to get him to pay off the bill. Last month, he was held in contempt of court for failing to produce financial records in the case. The county sold the PNC property at sheriff's sale Oct. 25 to a business run by his son, Seth.

P. Sue Perotty, a former executive vice president of First Union Bank and a co-trustee of the trust that owned the bank property, declined to discuss the case. Before the sheriff's sale, Perotty said she was unaware its sale was imminent.

The bank property also figures in a suit filed by real estate salesman Edward L. Stutz, who worked for two years until 2001 as a Hampton vice president. Stutz claims in a federal lawsuit to have represented Hampton on the sale of the Palmerton property and a deal for the bank. Stutz's suit against Mendelson, Hampton and the family children's trust claims that he is owed more than $100,000 in unpaid commissions. Mendelson denied the claims.

Around the corner from the bank branch, Sal's Spaghetti House sits vacant and in a state of disrepair only exceeded by the Colonial.

Little has happened at the property since Salvatore Poidomani boiled his last pot of pasta in 1988. According to Allentown records, the first permit Mendelson took out on the property was in April 2001, to fix the roof. By that time, said Weiss of the city's Bureau of Building Standards and Safety, the structure had been without maintenance for so long that rainwater flowed out the front door. It now is scheduled for a December sheriff's sale.

Again, Mendelson said the Sal's property is a victim of the city's weak economy. Mendelson also said that in buying the property, he did the city a favor by closing a portion of the building that housed a nuisance bar.

Chenault, the former Americus manager, said Mendelson was approached about renting space in the Sal's building to a businessman who wanted to open either an after-hours or topless bar.

''He'd rather have an empty building than a less-than-reputable business there,'' Chenault said. ''We politely declined their offers.''

The future

Considering Mendelson's and Allentown City Hall's positions, the future for rebuilding the downtown through his properties is grim.

It is possible that Mendelson would back down, restore his properties and eliminate his delinquencies. ''The book isn't finished yet,'' he said. ''The city can wind up with beautiful gems that we've developed. Or we could sell our assets. The book's not done yet.''

The more likely scenarios do not bode well for Allentown.

If the city takes the Mendelson properties by eminent domain, it then would be faced with convincing someone else to shoulder the burden of expensive repairs or demolition.

If Mendelson resists the city, years of litigation could be on the horizon. City leaders point, for instance, to the battle with attorney Joseph L. Thorpe, who for two years fought the taking of his N. Fifth Street office building all the way to U.S. Supreme Court.

Mendelson said he could tie the city up in costly court battles neither side wants.

''It takes a lot of time, a lot of energy,'' he said. ''And who wins?''

As owner of significant downtown properties, he has enough clout to get city officials to listen to him.

''We do have enough real estate to have a negative impact on the city, which is all the more reason why the city should sit down and have a reasonable discussion,'' Mendelson said.

He is willing to get his tax bills current and fix his properties, he said, if the city comes up with a revitalization plan that encourages him to invest in them again. That could include tax breaks, special loans or grants and other major investments downtown.

But City Hall says there are no deals until Mendelson makes good on years of broken promises and bad faith.

''We need to see a good-faith effort,'' Afflerbach said. ''The best good-faith effort is pay the back taxes, pay the fees for water and sewer, upgrade your properties to code, then we can talk about negotiating a redevelopment plan.''

There may be one bit of consolation to Allentown.

Within a few feet of Sal's, the Colonial and the Americus is a beautiful, restored theater: Symphony Hall.

Fifteen years ago this month, the symphony association, stuck with a deteriorating building and a hefty debt, set a brave course for the restoration of the one-time burlesque house by undertaking its own fund-raising program and forgoing an offer to sell the building.